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CANADA ECONOMICS: Today's CPI Report Will Do Little To Allay Bank of Canada Concerns - RBC

RBC says while today's CPI report showed an uptick in the year-over-year rates, it will do little to allay the Bank's concerns given that over the course of the fourth quarter, the headline rate averaged just 0.9% while the core rate ran at 1.2%. RBC expects inflation to drift higher going forward, driven by "still-anchored expectations" around the Bank's 2% target, an improving demand backdrop and, to a lesser extent, increases is imported goods' prices given the weakening in the Canadian dollar. It adds the pace of increase, however, is likely to be gradual with both the headline and core CPI inflation rates only reaching the mid-point of the Bank's target range late in 2015. "Against this backdrop, the Bank is likely to maintain the overnight rate at 1.0% throughout 2014 with a rate increase likely to come in the second quarter of 2015."

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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